Pires Investments plc
Annual Report 2014

Plain-text annual report

Pires Investments plc (Incorporated in England and Wales with registered number 02929801) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 PIRES INVESTMENTS PLC Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Contents Company Information Chairman’s Statement Strategic Report Directors’ Report Report on Remuneration Statement of Directors’ Responsibilities Corporate Governance Report Report of the Independent Auditor Group Statement of Comprehensive Income Group and Company Statement of Changes in Equity Group Statement of Financial Position Company Statement of Financial Position Group Statement of Cash Flows Company Statement of Cash Flows Notes to the Group Financial Statements Page 1 2 3 6 8 9 10 11 13 14 15 16 17 18 19 PIRES INVESTMENTS PLC Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Company Information Directors Peter Redmond (Chairman) Placid Gonzales (Non-Executive Director) John May (Non-Executive Director) Secretary Carly Hines Registered office Independent Auditors Nominated adviser Broker Registrars c/o Morrison & Foerster CityPoint One Ropemaker Street London EC2Y 9AW Welbeck Associates Chartered Accountants and Registered Auditors 30 Percy Street London W1T 2DB Cairn Financial Advisers LLP 61 Cheapside London EC2V 6AX Peterhouse Corporate Finance Limited 3rd Floor New Liverpool House 15 – 17 Eldon Street London EC2M 7LD Computershare Investor Services plc PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH Company Registration number 02929801 Page | 1 PIRES INVESTMENTS PLC Chairman’s Statement Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 During the period under review, the Company set about implementing its investment strategy which is to invest substantially in companies in the resources and energy sectors, either at the pre-IPO stage or as quoted companies. From previous announcements, investors will be aware that we have made significant investments in Rame Energy plc (“Rame”), a renewable energy business which is now quoted on AIM but in which we invested at the pre-IPO stage, and in two AIM-quoted investing companies, Armstrong Ventures plc (“Armstrong”) and 3 Legs Resources plc (“3 Legs”), both of which are seeking a reverse takeover. We also have a modest investment in Kennedy Ventures plc (“Kennedy”), which at the time of making the investment was a shell company but which has since acquired a majority interest in a tantalite deposit in Namibia. Demand for tantalite is driven by the increased use of electronic devices. The deposit is expected to be back in production in the near future and is hoped to be the first of a number of tantalite asset acquisitions. Our investment in Rame was made principally at the pre-IPO stage, investing £410,000 in February 2014. We invested a further £55,000 at IPO and made a further modest investment to maintain our stake in a later fundraising round. Since IPO, Rame has successfully completed a 15 MW wind project at Raki in Chile and this is expected to be operational imminently; Rame has a 20% continuing equity interest in the project. Rame has announced the expansion of its pipeline of wind projects in partnership with Santander from 118MW to 133MW and it plans to commence work on two sites from this pipeline with a combined size of 54MW during Q4 2015. Having acquired an UK-based solar energy specialist, Rame has now commenced its first significant solar project in Chile. It has also commenced its first off-grid wind project, and sold one of its smaller Chilean wind projects on a basis that could earn it up to $2 million in consideration and fees, while retaining an option to take a 20% equity stake in that site. While Rame’s share trading performance has been disappointing since IPO, we remain confident of their business model and we hope to see significant progress over the next twelve months. While the Rame investment has not borne immediate positive results in stock market terms, we continue to regard investment in renewable energy to be a potentially fruitful area, though it needs to be approached selectively, particularly bearing in mind conditions in the local markets where the projects are situated. With regard to Chile, we took into account what we considered to be its relatively stable and growing economy, its structural energy deficit and its transparent and user-friendly renewable energy regime. We have established a subsidiary, Ventec Renewable Energy Limited, to assist the Company in identifying, analysing, assessing and structuring renewable energy projects, particularly in wind, in specific European markets with a view to acquiring or earning an equity position in such projects, working in partnership with a significant European wind consultancy/developer. Our investment in Kennedy, although modest, has performed well in overall terms, sitting at a 150% premium to our investment price and demonstrates what can be achieved through taking stakes in shell companies and seeking reverse acquisitions. Close to the end of the financial period, we invested a larger sum - £100,000 - in a placing of shares in Armstrong in the hope of achieving a similar result. Since then, Armstrong has reviewed a number of potential reverse takeovers and we are hopeful that it will complete such a transaction in the coming months. Since the year end, we have also participated with an investment of £80,000 in the refinancing of 3 Legs, an Isle of Man domiciled AIM-quoted company, for a similar purpose. We now hold a range of investments in line with our investing strategy and we hope to show positive returns from these investments in the current trading period. Meanwhile we continue to review the Company’s expenditure base and options for expanding its capital base. Peter Redmond Chairman 29 April 2015 Page | 2 PIRES INVESTMENTS PLC Strategic Report Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Business review and future developments Investments During the period under review Pires Investments plc (“the Group”) made the following investments: The Company converted a loan note into 3,037,037 new ordinary shares in Rame Energy plc (“Rame”). The Company also subscribed for 308,233 ordinary shares at a price of 18 pence per share and in total holds 3,345,270 ordinary shares presenting approximately 3.5 per cent of Rame’s issued share capital. As at year end the market value of the Company’s holding in Rame was £487,938, representing an unrealised loss of £39,407. The Company subscribed for 476,190,476 shares in Armstrong Ventures plc (“Armstrong”) at a price of 0.021 pence per share for a consideration of £100,000, representing approximately 13 per cent of Armstrong’s issued share capital. As at the year end the market value of the Company’s holding in Armstrong was £130,952, representing an unrealised gain of £30,952. The Company subscribed for 2,000,000 shares in Kennedy Ventures plc (“Kennedy”) at a price of £0.0125 pence per share for a consideration of £25,000. As at year end the market value of Kennedy was £57,500, representing an unrealised gain of £32,500. Subsequent to 31 October 2014 the Company has subscribed for 34,482,760 ordinary shares in 3Legs Resources plc for a consideration of £80,000. Investing Policy The Group’s investing policy, as disclosed on the website (www.piresinvestments.com) is as follows: “The Group's Investing Policy is to invest principally, but not exclusively in the resources and energy sectors. The Group will initially focus on projects located in Asia but will also consider investments in other geographical regions. The Group may be either an active investor and acquire control of a single company or it may acquire non-controlling shareholdings. Once a target has been identified, additional funds may need to be raised by the Group to complete a transaction. The proposed investments to be made by the Group may be in either quoted or unquoted securities made by direct acquisition and may be in companies, partnerships or joint ventures; or direct interests in projects and can be at any stage of development. The Group’s equity interest in a proposed investment may range from a minority position to 100 per cent ownership. The Group will identify and assess potential investment targets and where it believes further investigation is required, intends to appoint appropriately qualified advisers to assist. The Group proposes to carry out a comprehensive and thorough project review process in which all material aspects of any potential investment will be subject to rigorous due diligences, as appropriate. It is likely that the Group’s financial resources will be invested in a small number of projects or investments or potentially in just one investment which may be deemed to be a reverse takeover under the AIM Rules. Where this is the case, it is intended to mitigate risk by undertaking an appropriate due diligence process. Any transaction constituting a reverse takeover under the AIM Rules will require shareholder approval. The possibility of building a broader portfolio of investment assets has not, however, been excluded. The Group intends to deliver shareholder returns principally through capital growth rather than capital distribution via dividends. Given the nature of the Group’s Investing Policy, the Group does not intend to make regular periodic disclosures or calculations of net asset value. Page | 3 PIRES INVESTMENTS PLC Strategic Report Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 The Directors believe that their broad collective experience together with their extensive network of contacts will assist them in the identification, evaluation and funding of suitable investment opportunities. When necessary, other external professionals will be engaged to assist in the due diligence of prospective opportunities. The Directors will also consider appointing additional directors with relevant experience if the need arises. The objective of the Directors is to generate capital appreciation and any income generated by the Group will be applied to cover costs or will be added to the funds available to further implement the Investment Policy. In view of this, it is unlikely that the Directors will recommend a dividend in the early years. However, they may recommend or declare dividends at some future date depending on the financial position of the Group. The Directors confirm that, as required by the AIM Rules, they will at each annual general meeting of the Group seek shareholder approval of its Investing Policy.” Key performance indicators The key performance indicators are set out below: Net asset value Net asset value – fully diluted per share Cash and cash equivalents Principal business risks and uncertainties 31 October 2014 961,726 0.041 £295,198 31 October 2013 £1,305,635 0.057 £1,195,379 Change % (26%) (28%) (75%) Identifying suitable targets The Group is dependent upon the ability of the Directors to identify suitable investment opportunities and to implement its Investing Policy. There is no guarantee that the Group will be able to source further opportunities, or complete Investments, at an appropriate price, or at all, as a consequence of which resources may be expended fruitlessly on investigative work and due diligence. Market conditions Market conditions may have a negative impact on the Group’s ability to execute investments in suitable entities which generate acceptable returns. There is no guarantee that the Group will be successful in sourcing suitable investments. Costs associated with potential investments The Group expects to incur certain third party costs associated with the sourcing of suitable investments. The Company can give no assurance as to the level of such costs, and given that there can be no guarantee that negotiations to acquire any given investment will be successful, the greater the number of deals that do not reach completion, the greater the likely impact of such costs on the Group’s performance, financial condition and business prospects. Valuation error The Group may miscalculate the realisable value of an investment in a project. A lack of reliable information, errors in assumptions or forecasts and/or inability to successfully implement an investment, among other factors, could all result in the project having a lower realisable value than anticipated. If the Group is not able to realise an investment at its anticipated levels of profitability, projected investment returns could be adversely affected. Funding It is likely that, if the Company identifies and wishes to pursue an investment opportunity or a reverse takeover, it is likely to need to raise further funds for further working or development capital. There is Page | 4 PIRES INVESTMENTS PLC Strategic Report Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 no guarantee that the then prevailing market conditions will allow for such a fundraising or that new investors will be prepared to invest on a basis which is acceptable to shareholders. Financial risk management objectives and policies Details of the Group’s financial instruments and financial risk management policies can be found in notes 13 and 14 to the financial statements. Assessment of Business Risk The Board regularly reviews operating and strategic risks and considers in such reviews financial and non-financial information including:     a review of the business at each Board meeting, focusing on any new decisions/risks arising; the performance of investments; selection criteria of new investments; and reports prepared by third parties. Peter Redmond Director 29 April 2015 Page | 5 PIRES INVESTMENTS PLC Directors’ Report Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 The Directors present their annual report and the audited group financial statements of Pires Investments plc for the year ended 31 October 2014. The Company’s shares of 0.1p each are traded on AIM Market of the London Stock Exchange. Results and dividends The Group’s loss from continuing activities for the year was £326,909 (2013 loss: £352,634). The Directors are unable to recommend the payment of a dividend, given the deficit on distributable reserves. Principal activities and review of business The principal activities of the Group throughout the year under review and since have been as an investment company which has involved the seeking, investigation and making of investments. The review of the business is contained within the Strategic Report on page 3. Events after the Reporting Period Since 31 October 2014, the Company has subscribed for 34,482,760 new ordinary shares in a placing by 3Legs Resources plc for a consideration of £80,000. The new shares represent approximately 8.0 per cent of 3Legs total voting rights. Directors The following Directors have held office since 1 November 2013: Peter Redmond Aamir Quraishi (resigned 18 December 2014) Christopher Yates (resigned 18 December 2014) Richard Armstrong (appointed 14 February 2014 and resigned 18 December 2014) Placid Gonzales and John May were appointed to the Board on 18 December 2014. Charitable and political donations No charitable or political donations were made during the year (2013: nil). Going concern The financial statements have been prepared on a going concern basis because, as set out in detail in Note 2 (Going Concern), the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Page | 6 PIRES INVESTMENTS PLC Directors’ Report (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Substantial shareholders As at 1 April 2015, the Company’s share register showed the following shareholdings representing 3% or more of the Company’s issued ordinary share capital: Shareholder *Ambrosia Investment Limited Jim Nominees Limited Pershing Nominees Limited TD Direct Investing Nominees Limited *AIMS Consultancy Limited W B Nominees Limited XCAP Nominees Limited Barclayshare Nominees Limited Ordinary shares of 0.1p each Number 375,000,000 290,898,591 225,000,000 131,034,577 125,000,000 111,660,000 86,754,000 72,768,566 % of the issued ordinary share capital 16.15% 12.53% 9.69% 5.64% 5.38% 4.81% 3.74% 3.13% * Emmanouil Vandirlis, a consultant and part of the key management of the Group, indirectly has an interest in 23.1% of the Company, by way of his controlling shareholding in the above companies and additional shares held through a nominee account. Auditor Welbeck Associates have expressed their willingness to continue in office as auditor and a resolution to re-appoint them will be proposed at the forthcoming Annual General Meeting. By order of the Board Peter Redmond Director 29 April 2015 Page | 7 PIRES INVESTMENTS PLC Report on Remuneration Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Policy on Directors’ remuneration The policy of the Board is to provide remuneration packages designed to attract, motivate and retain Directors of the calibre necessary to maintain the Company’s position. It aims to provide sufficient levels of remuneration to do this, but to avoid paying more than is necessary. The remuneration will reflect the Directors’ responsibilities and time commitment. Remuneration of the Directors During the period, the following remuneration and other benefits were charged to the Company: Salaries 2014 £ 20,000 15,000 12,500 13,616 61,116 Peter Redmond Aamir Quraishi Christopher Yates Richard Armstrong Total 2014 £ 44,000 17,500 18,450 17,866 97,816 Fees 2014 £ 24,000 2,500 5,950 4,250 36,700 Total 2013 £ 15,000 15,000 35,833 - 65,833 . Directors’ interests The Directors’ beneficial interests in the share capital of the Company as at 31 October 2013 and 31 October 2014 were: Peter Redmond (note 1) Aamir Quraishi (note 1) Richard Armstrong Christopher Yates Ordinary shares of 0.1p each 31 October 2014 - - 15,113,436 6,766,819 Ordinary shares of 0.1p each 31 October 2013 - - 15,113,436 6,766,819 Notes: 1 On 17 April 2012, the Board granted to each of Peter Redmond and Aamir Quraishi a warrant over 1.5% of the Company’s issued ordinary share capital from time to time exercisable at 0.1p per new ordinary share at any time up to 17 April 2015 and have lapsed post year end. Peter Redmond Director 29 April 2015 Page | 8 PIRES INVESTMENTS PLC Statement of Directors Responsibilities Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Statement of Directors’ responsibilities The Directors are responsible for preparing the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the Company financial statements under IFRSs as adopted by the EU. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, International Accounting Standard 1 requires the Directors to: • properly select and apply accounting policies; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • make judgements and accounting estimates that are reasonable and prudent • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and • make an assessment of the Company’s ability to continue as a going concern. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Disclosure of information In the case of each of the persons who are acting as Directors of the Company at the date when this report was approved:- • so far as each of the Directors is aware, there is no relevant audit information (as defined in the Companies Act 2006) of the which the Company’s auditor is not aware; and • each of the Directors has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information (as defined) and to establish that the Company’s auditor is aware of that information. The Directors are also responsible for the maintenance and integrity of the investor information contained on the website. Legislation in the UK concerning the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Publication of Accounts on the Company Website Financial statements are published on the Company’s website. The maintenance and integrity of the website is the responsibility of the Directors. The Director’s responsibility also extends to the financial statements contained therein. By order of the Board Peter Redmond 29 April 2015 Director Page | 9 PIRES INVESTMENTS PLC Corporate Governance Report Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 The Company’s shares are traded on AIM and, accordingly, compliance with the revised UK Corporate Governance Code is not mandatory. However, the Company has sought to comply with the principles underlying the provisions of the Code in so far as it considers them to be appropriate for a company of this size and nature. The Board is accountable to the Company’s shareholders for good corporate governance. This report and the Remuneration Report describe how the Company applies the provisions of good corporate governance. Directors The Board currently consists of the Chairman and two other Directors whilst it is seeking investment opportunities. It is responsible for approving Company policy and strategy and for implementing it with support from consultants. The Directors will review the composition of the Board on a regular basis. All Directors have access to advice from the Company Secretary and independent professional advice at the Company’s expense. Relations with shareholders The Company values the views of its shareholders and recognises their interest in the Company’s strategy and performance. The Annual General Meeting is used to communicate with investors and they are encouraged to participate and the Directors are available to answer questions. Separate resolutions are proposed on each issue so that they can be given proper consideration. Audit Committee During the year the Audit Committee comprised Christopher Yates and Peter Redmond and now comprises John May and Peter Redmond. The Committee has met with the auditors and considered the results and the audit process, and has satisfied itself as to the auditor’s independence during the year. Remuneration Committee During the year the Remuneration Committee comprised Christopher Yates and Peter Redmond and now comprises John May and Placid Gonzales. The policy of the Company on remuneration is to reward individual performance so as to promote the best interests of the Company and enhance shareholder value. The remuneration of Directors is approved by the Board. Individual Directors do not participate in decisions concerning their own remuneration. Internal control The Board is committed to the maintenance of effective internal controls. The Board recognises its responsibility for maintaining a strong system of internal control to safeguard shareholders’ investment and the Company’s assets and for reviewing its effectiveness. The system of internal financial control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The Board has determined that there is currently no requirement for an internal audit function whilst it is seeking investment opportunities. However, the Directors will continue to review the requirement for an internal audit function on a regular basis. Peter Redmond Director 29 April 2015 Page | 10 PIRES INVESTMENTS PLC Independent auditor’s report to the members of Pires Investments Plc Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 We have audited the financial statements of Pires Investments plc for the year ended 31 October 2014 which comprise the statement of comprehensive income, statement of changes in equity, statement of financial position, statement of cash flows and the related notes to the financial statements. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the Group’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Group’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group and the Group’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditor As explained more fully in the Directors' Responsibilities Statements, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition we read all financial and non-financial information in the Chairman’s Statement, Strategic Report, and Report of the Directors to identify any information that is apparently materially incorrect based on, or materially inconsistent with the knowledge acquired by us in the course of performing the audit. A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion the financial statements: • • • give a true and fair view of the state of the Group and Company’s affairs as at 31 October 2014 and of the Group’s loss for the year then ended; have been properly prepared in accordance with IFRS as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ Report for the financial period for which the financial statements are prepared is consistent with the financial statements. Page | 11 PIRES INVESTMENTS PLC Independent auditor’s report to the members of Pires Investments Plc (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Emphasis of Matter – Going Concern In forming our opinion on the financial statements, which is not modified, we draw your attention to the disclosures made in note 2 to the financial statements concerning the Group’s ability to continue as a going concern. These conditions, along with other matters explained in note 2 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the ability of the Group to continue as a going concern. The Directors have plans to manage the cash flows of the Group to enable it to continue as a going concern. These plans include either raising capital or liquidating quoted investments to provide the working capital requirements for the next 12 months. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • • • • adequate accounting records have not been kept by the Group, or returns adequate for our audit have not been received from branches not visited by us; or the Group financial statements are not in agreement with the accounting records and returns; or certain disclosures of Directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Jonathan Bradley-Hoare (Senior Statutory Auditor) For and on behalf of Welbeck Associates Chartered Accountants and Statutory Auditor 30 Percy Street London W1T 2DB 29 April 2015 Page | 12 PIRES INVESTMENTS PLC Group Statement of Comprehensive Income Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 CONTINUING ACTIVITIES Revenue Investment income Other income Total revenue Gains/losses on investments held at fair value through profit or loss Operating expenses Operating (loss) / profit from continuing activities (Loss) / profit before taxation from continuing activities Tax (Loss)/profit for the period and total comprehensive income attributable to equity holders of the Company Notes 6 12 4 8 2014 £ 1,833 5,000 6,833 2013 £ 4,327 25,050 29,377 (15,981) (45,939) (317,761) (336,072) (326,909) (352,634) (326,909) (352,634) - - (326,909) (352,634) Basic (loss) / earnings per share Equity holders Basic and diluted 9 (0.01)p (0.02)p The Company has elected to take exemption under section 408 of the Companies Act 2006 not to present the Parent Company profit and loss accounts. The loss for the Parent Company for the year was £325,031 (2013: £352,634). The accounting policies and notes are an integral part of these financial statements. Page | 13 PIRES INVESTMENTS PLC Company Statement of Changes in Equity Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 GROUP Share Capital £ 11,287,103 Share Premium £ 2,932,818 Shares to be issued £ 82,611 Capital Redemption Reserve £ 164,667 Retained Earnings £ (13,264,430) Total £ 1,202,769 - 566,089 - 11,853,192 - 16,522 (44,500) 2,904,840 - (82,611) - - - - - 164,667 (352,634) - - (13,617,064) (352,634) 500,000 (44,500) 1,305,635 - 11,853,192 - 2,904,840 - - - 164,667 (326,909) (13,943,973) (326,909) 978,726 Share Capital £ 11,287,103 Share Premium £ 2,932,818 Shares to be issued £ 82,611 Capital Redemption Reserve £ 164,667 Retained Earnings £ (13,264,430) Total £ 1,202,769 - 566,089 - 11,853,192 - 16,522 (44,500) 2,904,840 - (82,611) - - - - - 164,667 (352,634) - - (13,617,064) (352,634) 500,000 (44,500) 1,305,635 - 11,853,192 - 2,904,840 - - - 164,667 (325,031) (13,942,095) (325,031) 980,604 Balance at 1 November 2012 Total comprehensive income for the year ended 31 October 2013 Issue of shares Share issuance costs As at 31 October 2013 Total comprehensive income for the year ended 31 October 2014 As at 31 October 2014 COMPANY Balance at 1 November 2012 Total comprehensive income for the year ended 31 October 2013 Issue of shares Share issuance costs As at 31 October 2013 Total comprehensive income for the year ended 31 October 2014 As at 31 October 2014 Page | 14 PIRES INVESTMENTS PLC (Incorporated in England and Wales with registered number 02929801) Group Statement of Financial Position Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Non-current assets Property, plant and equipment Investment in subsidiaries Total non-current assets Current assets Investments Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity Issued share capital Share premium Retained earnings Capital redemption reserve Total equity Liabilities Current liabilities Trade and other payables Total liabilities and current liabilities Total equity and liabilities Note 10 12 16 17 17 18 2014 £ 2,163 - 2,163 2013 £ 1,812 - 1,812 698,612 122,396 295,198 1,116,206 1,118,369 84,966 128,588 1,195,379 1,408,933 1,410,745 11,853,192 2,904,840 (13,943,973) 164,667 978,726 11,853,192 2,904,840 (13,617,064) 164,667 1,305,635 139,643 139,643 105,110 105,110 1,118,369 1,410,745 These financial statements were approved and authorised for issue by the Board of Directors on 29 April 2015 and were signed on its behalf by: Peter Redmond Director John May Director Page | 15 PIRES INVESTMENTS PLC (Incorporated in England and Wales with registered number 02929801) Company Statement of Financial Position Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Non-current assets Property, plant and equipment Investment in subsidiaries Total non-current assets Current assets Investments Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity Issued share capital Share premium Retained earnings Capital redemption reserve Total equity Liabilities Current liabilities Trade and other payables Total liabilities and current liabilities Total equity and liabilities Note 10 12 16 17 17 18 2014 £ 2,163 18,503 20,666 2013 £ 1,812 - 1,812 698,612 124,271 276,698 1,099,581 1,120,247 84,966 128,588 1,195,379 1,408,933 1,410,745 11,853,192 2,904,840 (13,942,095) 164,667 980,604 11,853,192 2,904,840 (13,617,064) 164,667 1,305,635 139,643 139,643 105,110 105,110 1,120,247 1,410,745 These financial statements were approved and authorised for issue by the Board of Directors on 29 April 2015 and were signed on its behalf by: Peter Redmond Director John May Director Page | 16 PIRES INVESTMENTS PLC Group Statement of Cash Flows Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Cash flows from operating activities Net cash absorbed by operating activities Cash flows from investing activities Payments to acquire tangible fixed assets Payments to acquire investments Proceeds of disposal of investments Finance income received net Net cash used in investing activities Cash flows from financing activities Net (repayments)/advances on borrowings Cash from subscriptions for new shares Expenses of share issue Finance cost paid Net cash from financing activities 2014 £ 2013 £ Note 19 (271,131) (372,045) (1,256) (674,349) 44,722 1,833 (629,050) (2,109) (863,206) 732,302 4,327 (128,686) - - - - - 500,000 (44,500) - 455,500 Net (decrease)/increase in cash and cash equivalents during the year (900,181) (45,231) Cash and cash equivalents at beginning of year 1,195,379 1,240,610 Cash and cash equivalents at end of year 295,198 1,195,379 Page | 17 PIRES INVESTMENTS PLC Company Statement of Cash Flows Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 Cash flows from operating activities Net cash absorbed by operating activities Cash flows from investing activities Payments to acquire tangible fixed assets Payments to acquire investments Proceeds of disposal of investments Finance income received net Net cash used in investing activities Cash flows from financing activities Net (repayments)/advances on borrowings Cash from subscriptions for new shares Expenses of share issue Finance cost paid Net cash from financing activities 2014 £ 2013 £ Note 19 (289,631) (372,045) (1,256) (674,349) 44,722 1,833 (629,050) - - - - (2,109) (863,206) 732,302 4,327 (128,686) - 500,000 (44,500) - 455,500 Net (decrease)/increase in cash and cash equivalents during the year (918,681) (45,231) Cash and cash equivalents at beginning of year 1,195,379 1,240,610 Cash and cash equivalents at end of year 276,698 1,195,379 Page | 18 PIRES INVESTMENTS PLC Notes to the Group Financial Statements Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 1. ACCOUNTING POLICIES General Information Pires Investments plc (“the Company”) was throughout the year an investing company with an investing policy adopted on 16 April 2012 and re-adopted on 21 March 2013. The Company is a limited liability company incorporated and domiciled in England. The address of the registered office is c/o Morrison & Foerster, CityPoint, One Ropemaker Street, London EC2Y 9AW. These financial statements are prepared in Pounds Sterling, because that is the currency of the primary economic environment in which the Company operates. Principal accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated. Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and IFRIC interpretations as adopted by the European Union applicable to companies reporting under IFRSs. The financial statements have also been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed later in these accounting policies. Going Concern Any consideration of the foreseeable future involved making a judgement, at a particular point in time, about future events which are inherently uncertain. The ability of the Group to carry out its planned business objectives is dependent on its continuing ability to raise adequate capital from equity investors and/or the realisation of quoted investments. Nevertheless, at the time of approving these financial statements and after making due enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue operating for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Company’s financial statements. Page | 19 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 1. ACCOUNTING POLICIES (continued) Statement of compliance The Directors anticipate that the adoption of new standards which are in issue but not yet effective and have not been early adopted by the Company will be relevant to the Company but will not result in significant changes to the Company’s accounting policies. These are: Amendments resulting from Annual improvements 2010-2012 Cycle Effective for accounting periods beginning on or after: 1 July 2014 Amendments resulting from Annual improvements 2011-2013 Cycle 1 July 2014 Deferral of mandatory effective date of IFRS 7 and amendments to transition disclosures Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures Consolidated Financial Statements – Amendments for investment entities Joint arrangements Disclosure of Interests in Other Entities – Amendments for investment entities Employee Benefits – Amended to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. Amendments for investment entities Investment in associates Financial Instruments: Presentation – Amendments to application guidance on the offsetting of financial assets and financial liabilities Impairment of assets Amendments resulting from Annual improvements 2010-2012 Cycle Financial Instruments: Recognition and Measurement – Amendments for novation of derivatives Levies Consolidated financial statements – Identification of the concept of control of an entity and the requirement to include in consolidated accounts 1 January 2015 1 January 2015 1 January 2014 1 January 2014 1 January 2014 1 July 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 July 2014 1 January 2014 1 January 2014 1 January 2014 IFRS 2,8,16,24,36 IFRS 3,13,IAS 40 IFRS 7 IFRS 9 IFRS 10 IFRS 11 IFRS 12 IAS 19 IAS 27 IAS 28 IAS 32 IAS 36 IAS 38 IAS 39 IFRIC 21 IFRS 10 The Directors anticipate that the adoption of the above Standards and Interpretations in future periods will have little or no impact on the Financial Statements of the Company. Depreciation Computer equipment is measured at cost less provision for depreciation. Depreciation is provided on these assets at 33 1/3% of cost per annum which is calculated to write off the cost less estimated residual value of the assets over their expected useful lives. Revenue recognition Revenue is measured at the fair value of consideration received or receivable and represents amounts receivable for goods or services provided in the normal course of business, net of discounts, VAT and other sales-related taxes, and provisions for returns. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. Dividend income is recognised at the time any market share price is adjusted to exclude the right to receive such dividend or, if there is no such adjustment, when received. Page | 20 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 1. ACCOUNTING POLICIES (continued) Deferred taxation Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Share based awards The Company has applied the requirements of IFRS 2 Share based payment. All services received in exchange for the grant of any share based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value of the share options/warrants awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Share based payments are ultimately recognised as an expense in the Statement of Comprehensive Income with a corresponding credit to the retained earning reserve in equity, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options/warrants expected to vest. Non-market vesting conditions are included in assumptions about the number of options/warrants that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options/warrants expected to vest differs from previous estimates. No adjustment is made to the expense or share issue cost recognised in prior periods if fewer share options ultimately are exercised than originally estimated. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium. Where share options are cancelled, this is treated as an acceleration of the vesting period of the options. The amount that otherwise would have been recognised for services received over the remainder of the vesting period is recognised immediately within the Statement of Comprehensive Income. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Investments in subsidiaries Investments in subsidiaries are stated in the Company's statement of financial position at cost less any attributable impairment losses. Page | 21 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 1. ACCOUNTING POLICIES (continued) Financial assets The Company classifies its financial assets into one of the following categories, cash and cash equivalents, loans and receivables and investments held at fair value through profit or loss depending on the purpose for which the asset was acquired. The Company has not classified any of its financial assets as held to maturity, held for trading or available for sale. Cash and cash equivalents Cash and cash equivalents comprise cash at hand and current and deposit balances at banks, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Loans and receivables Loans and receivables from third parties are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. Financial assets designated at fair value through profit or loss All short term investments are designated upon initial recognition as held at fair value through profit or loss (FVTPL). Investment transactions are accounted for on a trade date basis. Assets are de-recognised at the trade date of the disposal. Investments are initially measured at fair value plus incidental acquisition costs. Subsequently, they are measured at fair value in accordance with IAS 39. This is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. The fair value of the financial instruments in the balance sheet is based on the quoted bid price at the balance sheet date, with no deduction for any estimated future selling cost. Unquoted investments are valued by the directors using primary valuation techniques such as recent transactions, last price and net asset value. Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Statement of Comprehensive Income as “Net change in fair value of investments”. Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Financial liabilities Financial liabilities are recognised in the Group’s balance sheet when the Company becomes a party to the contractual provisions of the instrument. All interest related charges are recognised as an expense in finance cost in the income statement using the effective interest rate method. The Group's financial liabilities comprise trade and other payables. Trade payables are recognised initially at their fair value and subsequently measured at amortised cost less settlement payments. Page | 22 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 1. ACCOUNTING POLICIES (continued) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs. The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. Share capital account represents the nominal value of the shares issued. Retained earnings include all current and prior period results as disclosed in the Statement of Comprehensive Income. 2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATIONS The preparation of the financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amounts, events or actions, actual results ultimately may differ from these estimates. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In certain circumstances, where fair value cannot be readily established, the Company is required to make judgements over carrying value impairment, and evaluate the size of any impairment required. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period. Judgements and estimates that may affect future periods are as follows: GOING CONCERN The Company’s activities resulted in a loss of £326,909 (2013: Loss of £352,634) and the cash balance was £295,198 as at 31 October 2014 (2013: £1,195,379). As such, the Company’s operational existence is dependent on the ability to raise further funding, by way of an equity placing, issuing debt instruments, by the realisation of quoted investments, or by a reduction in operating costs. After making enquiries, the Directors have formed a judgement that there is a reasonable expectation that the Company can secure further adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements. Whilst there are inherent uncertainties in relation to future events, and therefore no certainty over the outcome of the matters described, the Directors consider that, based upon financial projections and dependent on the success of their efforts to complete these activities, the Company will be a going concern for the next twelve months. Page | 23 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATIONS (continued) FAIR VALUE OF FINANCIAL INSTRUMENTS The Company holds investments that have been designated as held at fair value through profit or loss. Investment transactions are accounted for on a trade date basis. Assets are de-recognised at the trade date of the disposal. Assets are sold at their fair value, which comprises the proceeds of sale less any transaction cost. The fair value of the financial instruments in the balance sheet is based on the quoted bid price at the balance sheet date, with no deduction for any estimated future selling cost. Unquoted investments are valued by the directors using primary valuation techniques such as recent transactions, last price and net asset value. Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the consolidated statement of comprehensive income as “Net gains on investments”. Investments are initially measured at fair value plus incidental acquisition costs. Subsequently, they are measured at fair value in accordance with IAS 39. This is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. 3. BUSINESS AND GEOGRAPHICAL REPORTING The Company’s operations are solely in the United Kingdom. Its primary trading operation and activity is the rendering of services and so no segmental analysis of operations is included. 4. OPERATING (LOSS)/PROFIT Operating (loss) / profit from continuing activities is stated after charging: Depreciation of property, plant and equipment 904 296 2014 £ 2013 £ 5. AUDITORS REMUNERATION During the year the Company obtained the following services from the Company’s auditor (in respect of continuing and discontinuing activities): Fees payable to auditors for the audit of the Company’s financial statements Fees paid to the Company’s auditors in respect of prior year audit Fees payable to the Company’s auditor and its associates for other services: Other services relating to taxation All other services 2014 £ 14,500 - - 1,500 - 2013 £ 14,500 3,440 - 1,500 2,100 16,000 21,540 Page | 24 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 6. INVESTMENT INCOME The Company’s finance income were: Interest receivable Dividends receivable 7. REMUNERATION 2014 £ 1,583 250 1,833 2013 £ 2,941 1,386 4,327 The Company’s employee benefit expense (for continuing and discontinued activities in 2014) was: Wages and salaries Social security costs 2014 £ 103,966 2,003 2013 £ 65,833 4,891 105,969 70,724 The average monthly number of persons employed by the Company, including Directors, during the year was as follows: 2014 No 4 2013 No 3 Details of Directors’ emoluments, including details of warrants awarded, are given in the Report on Remuneration. These disclosures form part of the audited financial statements of the Company. The Directors of the Company are considered to represent key management of the Company as defined by IFRS. Page | 25 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 8. TAX EXPENSE 8. 2014 £ 2013 £ Factors affecting the tax charge for the year (Loss)/ profit on ordinary activities before taxation (326,909) (352,634) (Loss)/ profit on ordinary activities before taxation multiplied by the standard rate of UK corporation tax of 21.83% (2013: 23.41%) (71,364) (82,552) Effects of: Extraordinary CVA gain not taxable Expenses not deductible for tax purposes net of income not subject to corporation tax Provisions against amounts due from subsidiaries - 5,224 - - 218 - Tax depreciation in excess of book depreciation (142) (424) Loss on disposal of capital assets Tax losses arising in the year carried forward Tax losses of prior year offset against realised investment gains Unrealised taxable losses not subject to tax in the period Share-based payment charge not deductible Tax charge - 78,863 - (12,581) - - - 72,004 (3,611) 14,365 - - The Company has tax losses available to carry forward against relevant future taxable income and profits of approximately £2.4 million (2013: £2.0 million) in respect of which no deferred tax asset has been recognised. Where it is anticipated that future taxable profits will be available against which these losses will be utilised a deferred tax asset is recognised. Page | 26 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 9. (LOSS)/EARNINGS PER SHARE (Loss)/profit attributable to the owners of the Company Continuing Operations (326,909) (352,634) 2014 £ 2013 £ Weighted average number of shares for calculating basic loss per share Basic and diluted loss per share Continuing Operations 2014 No. of shares 2013 No. of shares 2,321,659,864 1,945,616,874 2014 pence 2013 pence (0.01) (0.02) There were no dilutive instruments which would give rise to diluted earnings per share. 10. PROPERTY, PLANT AND EQUIPMENT Cost At 1 November 2012 Disposals during the year At 1 November 2013 Additions during the year At 31 October 2014 Depreciation At 1 November 2012 Charge for the year Disposal during the year At 1 November 2013 Charge for the year As at 31 October 2014 Carrying amount As at 31 October 2014 At 31 October 2013 At 31 October 2012 Computer equipment £ - - 2,108 1,255 3,363 - - 296 904 1,200 2,163 1,812 - Page | 27 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 11. FAIR VALUE MEASUREMENT The table below sets out the fair value measurements using the IFRS 7 fair value hierarchy. Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value measurement of the relevant asset as follows: Level 1 – valued using quoted prices in active markets for identical assets. Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1. Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data. There were no transfers between Level 1 and Level 3 in 2014 or 2013. 12. INVESTMENTS Investments held at fair value through profit or loss Investments at fair value brought forward Purchase of investments Investment disposals Provision for impairment of unquoted investments Movement in investment holding gains Balance Categorised as Level 1 – quoted prices Level 3 – Unquoted investments 84,966 674,349 (44,723) (27,777) 11,797 698,612 676,389 22,223 The valuation techniques used by the Group are explained in the accounting policy note, “financial assets designated at fair value through profit or loss”. Gains / (losses) on investments held at fair value through profit or loss Movement in investment holding gains Realised loss on disposal of investments Impairment of Level 3 investments Net loss on investments held at fair value through profit or loss Unquoted investments (Level 3) 85,409 (73,613) (27,777) (15,981) The value of the unquoted investments as at 31 October 2014 was £22,223 and the amount comprised a holding in Shale Energy plc. Shale Energy plc is an unquoted public company whose focus is the acquisition or development of oil, gas or shale gas assets principally in the UK. The holding is valued on the basis of evaluation of subsequent pre-IPO fundraising. The latest fundraising price and liquidity of private investors are reflected in determining the fair value of the investment holding. The Directors consider this value to be supported by information they have received over the course of the financial year. Page | 28 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 13. RISK MANAGEMENT OBJECTIVES AND POLICIES The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The Company’s risk management is coordinated by the Board of Directors, and focuses on actively securing the Company’s short to medium term cash flows by minimising the exposure to financial markets. The main risks the Company is exposed to through its financial instruments are credit risk, foreign currency risk, liquidity risk and market price risk. Capital risk management The Group’s objectives when managing capital are:    to safeguard the Group’s ability to continue as a going concern, so that it continues to provide returns and benefits for shareholders; to support the Group’s growth; and to provide capital for the purpose of strengthening the Group’s risk management capability. The Group actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and equity holder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. Management regards total equity as capital and reserves, for capital management purposes. Credit risk The Group’s financial instruments, which are subject to credit risk, are cash and cash equivalents and loans and receivables. The credit risk for cash and cash equivalents is considered negligible since the counterparties are reputable financial institutions. The Company’s maximum exposure to credit risk is £428,053 (2013: £1,291,731) comprising cash and cash equivalents and loans and receivables. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Company manages this risk through maintaining a positive cash balance and controlling expenses and commitments. The Directors are confident that adequate resources exist to finance current operations. Market price risk The Group’s exposure to market price risk mainly arises from potential movements in the fair value of its investments. The Group’s exposure to price risk on quoted investments is as follows: Change in equity Increase in quoted investments by 10% Decrease in quoted investments by 10% 2014 £ 67,640 (67,640) 2013 £ 5,697 (5,697) Page | 29 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 14. FINANCIAL INSTRUMENTS Financial assets by category: The IAS 39 categories of financial asset included in the statement of financial position and the headings in which they are included are as follows: Financial assets: Fair value through profit or loss investments Loans and receivables Cash and cash equivalents Total Financial liabilities by category: 2014 £ 2013 £ 698,612 108,419 295,198 84,966 96,352 1,195,379 1,102,229 1,376,697 The IAS 39 categories of financial liabilities included in the statement of financial position and the headings in which they are included are as follows: Trade and other payables 15. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS Cost At 1 November 2012 Disposals during the year At 1 November 2013 Disposals during the year Additions during the year At 31 October 2014 Provision for diminution in value At 1 November 2012 Disposals during the year At 1 November 2013 Disposals during the year At 31 October 2014 Net book value At 31 October 2014 At 31 October 2013 2014 £ 62,968 2013 £ 51,526 £ 100 (100) - - 18,503 18,503 100 (100) - - - 18,503 - Page | 30 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 All principal subsidiaries of the Group are consolidated into the financial statements. At 31 October 2014 the subsidiaries were as follows: Country of registration UK Germany UK Principal activity Renewable Energy Renewable Energy Dormant Percentage holding 100% 90% 100% Subsidiary undertakings Ventec Renewable Energy Limited Ventec Wind 1 GmbH Energy Investment Opportunities Limited 16. TRADE AND OTHER RECEIVABLES Amount held by Insolvency Practitioner in connection with CVA Other receivables Group 2014 £ 2013 £ Company 2014 £ 2013 £ 6,104 16,682 6,104 16,682 102,315 79,670 104,190 79,670 Prepayments and accrued income 13,977 32,236 13,977 32,236 122,396 128,588 124,271 128,588 As described in note 13, the Directors do not consider credit risk to be material to the Company's operations. 17. ISSUED SHARE CAPITAL Issued and fully paid: At 1 November 2012 Ordinary shares of 0.1p each Deferred shares of 5p each Deferred shares of 4.9p each Ordinary shares issued Share issuance costs At 31 October 2013 Ordinary shares of 0.1p each Deferred shares of 5p each Deferred shares of 4.9p each Ordinary shares issued Share issuance costs At 31 October 2014 Ordinary shares of 0.1p each Deferred shares of 5p each Deferred shares of 4.9p each Number of shares Nominal value £ Share premium £ 1,755,570,856 136,171,197 55,570,856 1,755,571 6,808,560 2,722,972 11,287,103 566,089,008 - 566,089 - 2,932,818 - - 2,932,818 16,522 (44,500) 2,321,659,864 136,171,197 55,570,856 2,321,660 6,808,560 2,722,972 11,853,192 2,904,840 - - 2,904,840 - - - - - - 2,321,659,864 136,171,197 55,570,856 2,321,660 6,808,560 2,722,972 11,853,192 2,904,840 - - 2,904,840 Page | 31 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 17. ISSUED SHARE CAPITAL (continued) The holders of the ordinary shares are entitled to one vote for each share held on a poll. They are also entitled to receive dividends declared in proportion to the number of shares held (subject to any right of another class, and none currently exists, to receive a preferred dividend) and, on a return of capital and subject to the limited participation rights of the holders of the two classes of deferred shares detailed below and any subsequently created class of shares with preferential rights, to participate in such return in proportion to the number of shares held. Neither class of deferred shares have any voting or dividend rights and only have rights to a repayment of the nominal value of the shares and then only after a £100,000 per ordinary share has been returned to each holder of ordinary shares. The Company has the right to acquire for cancellation each entire class of deferred share for an aggregate consideration of 1p and the Company intends to exercise such right in due course. 18. TRADE AND OTHER PAYABLES Trade payables Other payables Accruals and deferred income Taxation and social security Group 2014 £ 35,686 2013 £ 21,459 Company 2014 £ 35,686 2013 £ 21,459 26,250 28,187 26,250 28,187 76,675 53,584 76,675 53,584 1,032 1,880 1,032 1,880 139,643 105,110 139,643 105,110 The fair value of trade and other payables has not been disclosed as, due to their short duration, management considers the carrying amounts recognised in the statement of financial position to be a reasonable approximation of their fair value. Page | 32 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 19. CASH ABSORBED BY OPERATIONS Group (Loss) Depreciation Realised (loss)/gain on disposal of investments Fair value movements in investments Finance income Finance costs Decrease/(increase) in receivables (Decrease)/increase in payables Cash absorbed by operations Company (Loss) Depreciation Realised (loss)/gain on disposal of investments Fair value movements in investments Finance income Finance costs Decrease/(increase) in receivables (Decrease)/increase in payables Cash absorbed by operations 2014 £ 2013 £ (343,909) (352,634) 904 296 73,612 (15,424) (85,409) 61,363 (1,833) (4,327) - - 32,971 (64,565) 52,533 3,246 (271,131) (372,045) 2014 £ 2013 £ (325,031) (352,634) 904 296 73,612 (15,424) (85,409) 61,363 (1,833) (4,327) - - 13,593 (64,565) 34,533 3,246 (289,631) (372,045) 20. CONTINGENT LIABILITES At 31 October 2014 and 2013, the Company had no material contingent liabilities. 21. CAPITAL COMMITMENTS At 31 October 2014 and 2013, the Company had no capital commitments authorised or contracted by the Directors. 22. POTENTIAL SHARE ISSUES AND SHARE BASED PAYMENTS Page | 33 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 The Company has been subject to the following potential share issue obligations during the year, none of which are share based payments of the current year: On 16 April 2012, the Company granted a warrant to Peterhouse Capital Limited which gave Peterhouse Capital Limited the right to subscribe new ordinary shares of 0.1p each representing up to 3% of the issued share capital of the Company from time to time. The subscription price for the exercise of this warrant was 0.1p per share and the warrant was able to be exercised at any time up to 20 March 2015. On 17 April 2012, the Company granted warrants to each of Peter Redmond and Aamir Quraishi which each gave the holder the right to subscribe new ordinary shares of 0.1p each representing up to 1.5% of the issued share capital of the Company from time to time. The subscription price for the exercise of these warrants was 0.1p per share and the warrants were able to be exercised at any time up to 17 April 2015. The Directors have used the Black Scholes option pricing model to estimate the fair value of the warrants applying the assumptions below: Number of shares arising from warrants granted Grant date share price Exercise share price Risk free rate Expected volatility Option life Calculated fair value per share 139,229,592 0.10p 0.10p 3.00% 50% 3 years 0.0365p Exercise price for the year Number of shares to be issued upon exercise for the year ended 31 October 2014 31 October 2014 £ ended ended Exercise price for the year 31 October 2013 £ 0.10p 0.10p 0.10p 0.10p Outstanding at beginning of period Arising during the period 0.10p 139,229,592 - - Outstanding at end of period Exercisable at end of period 0.10p 0.10p 139,229,592 139,229,592 All outstanding warrants had lapsed post year end. Number of shares to be issued upon exercise price for the year ended 31 October 2013 105,334,260 33,965,332 139,229,592 139,229,592 Page | 34 PIRES INVESTMENTS PLC Notes to the Group Financial Statements (continued) Annual Report and Financial Statements FOR THE YEAR ENDED 31 OCTOBER 2014 23. RELATED PARTY TRANSACTIONS Ultimate controlling party The Directors do not consider there to be a single ultimate controlling party. Transactions with Directors Fees for consultancy services and disbursements supplied by Benedict Investments Limited, a company of which Aamir Quraishi is a director and the controlling shareholder 2014 £ 2,500 2013 £ 11,500 Fees for consultancy services supplied by Catalyst Consultancy Limited, a company beneficially controlled by Peter Redmond and of which he is a director 24,000 11,000 Fees for consultancy services supplied by City and Westminster Corporate Finance LLP, a company beneficially owned by John May 13,653 - Fees for consultancy services supplied by Christopher Yates as a consultant for services other than director’s duties 5,950 3,500 During the period, a member of key management, Emmanouil Vaindirlis, charged consultancy fees of £29,167 through a Company of which he is a Director, Newdoor Capital Limited. 24. POST BALANCE SHEET EVENTS Since 31 October 2014, the Company has subscribed for 34,482,760 new ordinary shares in a placing by 3Legs Resources plc for a consideration of £80,000. The new shares represent approximately 8.0 per cent of 3Legs total voting rights. Page | 35 

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